Starting on Sunday, Jan. 27, retailers will be allowed to tack a surcharge of up to 4% onto your tab if you want to pay with a credit card. If that sounds like a lot, you’re right. Happily, though, it’s unlikely to happen very often.

For years, card issuers have been making lots of money off so-called interchange fees. Until financial regulators and lawyers dragged this obscure term into general discourse, most people had no idea what an interchange fee is. (Still don’t? It’s the fee, typically about 2%, that a store pays your bank when you use a credit card at checkout.) For low-margin businesses like supermarkets as well as mom-and-pop stores that don’t have the clout of their big-box brethren to negotiate lower rates, these fees cut into profits in a big way.

But in a contentious legal ruling that is still being disputed, a U.S. District Court determined last year that merchants are allowed to pass along the cost of those credit-card interchange fees to customers. Consumer advocates say permitting surcharges is a slippery slope. “If a national sales tax of 2, 3, or 4 percent were being proposed, everyone would be up in arms,” ConsumerWorld.org founder Edgar Dworksy points out on his site.

But take a deep breath. You can avoid the fee by using a debit card, for one thing. And there are laws prohibiting these surcharges in 10 states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

Ultimately, though, consumer awareness will be the strongest deterrent against widespread credit-card surcharges. Stores have to let you know with a sign on the door if they’re going to add a surcharge — although they don’t have to tell you how much it is until point of sale, when you’re already at the cash register. And today’s retail landscape is hypercompetitive, so many stores will be hesitant to risk alienating customers by charging extra for using plastic.

As consumers, we don’t take kindly to paying fees for stuff that used to be free. Bank of America and other financial titans found this out the hard way in 2011, when they tried to impose fees on people for using debit cards and were forced to backpedal in the face of customer ire. “Customer feedback in New Zealand and Canada confirms that consumers are not willing to pay more for the same products or offerings,” an article about credit surcharges on American Express’s small-business Open Forum warns. In both studies the article cites, customers overwhelmingly rejected merchants that implemented surcharges.

If consumers respond in a similar fashion here — and there’s reason to believe they would — surcharges probably aren’t going to become common. There could be exceptions in markets where there’s little competition; we’ve seen airlines get away with piling on fees, for instance, because there are relatively few carriers out there for all the people who need to get from Point A to Point B. Consumer advocates also say online retail could become a hotbed of surcharges because these merchants only have to disclose a surcharge when they ask about payment method — a step that’s usually near the end of the checkout process. Advocates worry that shoppers will be too invested at that point to be dissuaded by the charge and will just suck it up.

Another possible outcome if stores start passing on interchange charges is that consumers might reduce their use of credit cards. That too would probably trigger a rollback of surcharges: stores and banks, after all, know that consumers spend more when they pay with credit cards instead of cash — up to twice as much, by some estimates. And if we do use cards, we’d probably use more bank-account or prepaid debit cards, which aren’t subject to the surcharge. In other words, we’d pay less in interest, which is good news for us but bad for banks. Earlier this month, banking expert Dennis Moroney told TIME that credit cards are a big profit center for banks. They’re not going to let that revenue stream plummet over what’s essentially a 2% or 3% annoyance tax.

In a new online guide to credit-card surcharges, watchdog group Consumer Action points out that different cards will have different surcharges, so customers will have to keep track of not only which stores charge them but also how much using each card would set them back. This sounds like a giant headache, but it’s something that could ultimately wind up benefiting customers. If surcharges become the norm, expect credit-card promotions touting low- or no-surcharge transactions to become part of banks’ marketing mix, similar to what we’ve seen with the gradual rollback of foreign transaction fees on many new card offers. No, it’s not as exciting as a rewards program that lets you earn cash back or a free flight somewhere, but those points, miles or what have you were never really free. They came at the expense of retailers and — by extension — you and every other customer who indirectly pays for those fees through the prices retailers set for their goods.

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Unfortunately, the large majority of my initial calls with prospective Franchisors aren’t quite as exciting as the one described above. The fact is, we regularly receive calls from business owners that have no reason to consider franchising their business, and many start by immediately asserting the fact that their business is either, new, struggling, or not even opened yet, but that they think their current or future business will be the next great American franchise.http://www.thefranchisebuilders.com/category/how-to-franchise/

And another thing...When people use credit cards, do you really think your using it for free. Well wake up anyone that uses credit cards. Why do you think you pay so much money for things, well guess what....the price of using credit cards is added to the price of the product. So if you stopped using credit cards and payed cash products would be cheaper.

Go stand in line in the bank, get cash. The reason for credit cards is because people are lazy and don't want to wait for anything. 10 to 15 years ago, people paid by cash and there was no problems. The second you use credit cards, your now paying anywhere from 15% to 25% interest on what you don't pay every month, get hit with annually charges $35 late fees, $35 overdraft fees.

Think about how broke this country is because everyone is so much in debt. Housing markets busted because people thought they can pay for their houses on credit cards. If you used cash and lived on cash basis, you would be debt free every month and instead of making payments every month to the credit card companies that only pay the interest off! You keep the banks in business by using your credit cards at rediculous rates.

Banks and credit card companies borrow the money from the Federal Government at something like .25% interest and then they have the gull to hit you with 15 to 24% interest, its all profit to them!

This was the scam that credit card companies use on merchants to rack in money. They get you with a low discount rate of about 1.8% then they slam you with these rediculous additional fees called interchange rate. Which means you have to use a plain vinalla credit card, which is doesn't really exist. The interchange rate is just as much as your discount rate, cards such as rewards cards, business cards, and anything that has perks and some others are subjected to the interchange rate. Retailers are hit as much as 4 to 5 percent of a transaction.

Visa & MasterCard are one sided, their chargeback policies are also a scam as well. It basically allows the buyer to file as many disputes against retailers as they want and they hold the merchant responsible for it. They claim that if you receive 1 chargeback out of 100 transactions your considered high risk. You see commercials on TV that tell the customer to file a dispute against the merchant because your 100% protected and then they set the rules in opposition to the merchant. They impose $500 so called arbitation fee if the customer still disputes the transaction to basically tell the merchant, just give the customer the product for free.

while i don't agree with the surcharge fees one has to admit that taking identical stores except one of them does not accept credit cards at all the other one does, which will do better. not only will consumers prefer to shop at the one with credi card but the avg $$ they spend is nearly double... that in itself should be enough reason for the retailer to not bitch and just pay the fee...

I understand the viewpoint of the consumer, which is a very strong argument. But the emphasis is being put on the business that passes on the surcharge. Meanwhile Visa and Mastercard are making billions on these interchange fees, with no pressure on them to reduce. And the small businesses are caught in the middle. Please don't forget - small businesses are the biggest source of employment in the country. It's Visa and Mastercard that are pissing on the consumer THRU the business, making billions in the process.

They may have the legal right to but by doing so they have broken the contract they signed with Visa etc. When a business does this to me I call the card issuer and place the surcharge in dispute and refuse to pay the surcharge. Please boycott any business that does this whether a mom and pop or a gas station. Valero seems to take joy in doing this. One time when a business rang up my sale at a mom and pop apparel store of several items with a total sale of over $200. they added the surcharge and I refused to pay. I left all the merchandise on their counter and went next door and shopped. Please note mom and pops arer some of the most greedty businesses in the US. Never can understand why someone will pay $10 for something they can get at Wal Mart or Costco for $3.00.

Actually dealing with cash is a cost to the business as well. Companies spend a lot of money managing cash at the retail level.

1) You need a safe to store cash.

2) You need deposit slips and bags.

3) You have to pay a company to pickup/dropoff your cash deposits.

4) The company pays insurance for the balance of cash held. (Eg. If a store typically keeps $25,000 worth of cash in its safe, it insures this 25,000)

So basically, managing cash is expensive in itself. Large retail stores rather accept credit cards over cash. It's actually cheaper and easier for them since the cost of the transaction is included in the price of the item, no one spends time counting cash, bagging, tagging, etc.

ARE YOU KIDDING? Not so bad? In WA, This surcharge is being charged on DEBIT CARDS, not just credit cards. ===ONLY 4% HA! ==COSTCO just charged 10% on our DEBIT card, debited IMMEDIATELY from our account. ==When vendors charge 10% of a sale, or like the local gas station charged ten cents more per gallon of gas [already too high priced] for using debit card or credit card, or vendors that charge welfare recipients already barely subsisting, on their foodstamp debit cards, THIS surcharge is BAD. There is NO way to excuse or explain it to make it right, especially in our poor economy. ==Those who can least afford it, are paying most dearly. ==This surcharge is going to do further harm to our economy, and particularly to smaller vendors. ==WHO GETS THIS MONEY? WHERE IS IT REALLY GOING? FOLLOW THE MONEY!!!!

It is just amazing how ignorant people are in understanding how Credit Card companies work. Credit Card companies get money from you using their cards and then they charge the business for using "your" preferred method of payment. They add rewards and pass on extra fees to the merchant and make it illegal for the merchant to charge you for this convenience.

It costs nothing extra to use cash. Nothing extra to use a check.

But yet consumers are still whining. "I want to use my card (that costs someone else money when I use it) and I dont want to pay for it WAH WAH WAH!"

I just wanted to point out to all of the small and large retailers who would even consider charging surcharges on credit card transactions because of this settlement, DON'T DO IT! You will regret it in the long run when customers come up to the counter and give you an earlashing and walkout. Not only will you not sell anything, but I will go purchase the same goods at another merchant/retailer that doesn't surcharge and never return to your store again. Hence, you just lost a potential customer and income over a silly fee. Bank of America is a perfect example of this and we all know how that worked out. Consumers hate fees and it's a known fact that people who pay with credit spend twice as much. I could really care less how much any business/retailer spends on interchange fees/yr, its the price you pay to run a business and keep customers coming back.

My "Mom and Pop" retail store paid $15,335.00 in credit card fees last year, so the customer can have "rewards and cash back" You as a customer would benefit getting a "cash discount"...start asking for one where surcharges are happening.

How the U.S. District Court determined 4% processing charges on credit card purchase? Who is the Court judge? Looks like he/she need to be removed from her post or send to the mental hospital for check-up and correction.

We're already paying for it. It's built into the cost of goods in most cases. It's just like "free shipping" that major retailers use if you spend over a certain amount. It's not free. But it does make me feel better. :-)

Great news! We're not in retail but commercial goods only. We've been seeing an increase in customers wanting to pay with CC instead of purchase orders only. Now we can finally consider charging the ones who insist on using CC, which to us is more laborious than a purchase order.

this means I am an owner of business that uses this fee. Paying this fee makes me a partner in the business because I am buying shares of the company with my fees. I will write thisoff as royalty and business owner of the company.

If you use a credit or debit card you are already paying extra. Businesses have already built in extra to cover these cost. If your paying in cash your paying a higher price because of people using their cards. It would be fairer to cash customers if card users were charged a fee or cash payers were given a discount. The Banks are the ones making out when it comes to credit cards don't blame the businesses.

That this would appear as an "ordered by the court" item is just another illustration (abet a good one) that in a democracy Big Money can buy as much government as it wants or needs. The sad part isn't so much that our government is for sale--but how reasonably priced it really is. And, of course, buyers cover all the expenses including the merchants cost of using a credit card--which illustrates the utter fallacy of businesses paying taxes--just where do you suppose that money comes from? Right out of your pocket. Business taxes are just a form of hidden income tax.

Even though it costs a couple of percent, payment by CC is also a convenience to the seller. If they want charge the consumer for this, I'll go back to paying by cash and check. Or maybe even try the new thing, which is to have it billed to my phone.

I run a small business and only accept payment via PayPal (which allows for payments by CC). As a result I don't have to mess with handling CC numbers at all, I am protected against fraud, and have money automatically added to my bank account when purchases are made. So it's worth every penny of the transaction charges that PayPal adds. And no, I don't add this cost to my product prices any more than I do what I spend on office supplies; it's just another cost of doing business.

Befoe reading this article, I was prepared to cancel all my cards. I use them all month and then pay them off each month. That way I don't hold lines up making out a check, I can separate business from personal expenses and get in and out fast. Rest assured, I will ask the merchant before I make a purchase and if they respond in the positive, I will walk out and go elsewhere. LETS START A MOVEMENT TO GET IN THE HABIT OF ASKING THE MERCHANT . IF THEY SAY YES, TELL THEM YOU ARE LEAVING, THEN DO IT. THEY WILL GET THE MESSAGE QUICKLY. I HAVE A CONCEALED WEAPONS PERMIT. WHEN SIGNS STARTED APPEARING AT MERCHANTS, I WENT IN AND TOLD THEM GOODBY. WASN'T LONG BEFORE THEY CHANGED THEIR POLICY. SOME EVEN SAID,WE NEVER HAD SO MUCH NEGATIVE FEEDBACK.

News outlets are not doing a good job explaining the change. The surcharge is not designed to be a revenue stream for the merchants. They are limited to charging their average credit card interchange rate over a set time period. Also, they must register the fee they are charging with Visa. This is not just a matter of slapping a sign in a window.

People listen! Credit card companies and merchants are already making too much profits. Now they want to pass on more fees to you? I say the hell with it. I pledge not to use my credit cards for at least a month and only pay cash.

Instead of paying the credit card surcharge, pay cash with $5 bills regardless of the total. This way we're not trying to pick on any particluar retailer. The retailer will be reminded of the costs and security associated with handling cash including paying clerks to count tills after closing (don't work for free please and I'm aware of bill counters), mid-shift change runs and mid-shift deposits because the till only holds so much, etc. Keep in mind, there were benefits to paying with credit cards for both the consumer and retailer - you could look at this as a cash discount but I preferred the convenience of using my credit card.

@beattyyz absolutely! Nothing like knowing that you get pick pocketed or lose your wallet and all you need to do is make a phone call or two to cancel cards out. Cards are SOOO much easier for both merchants and customers alike. BANKS should make the concessions. BESIDES banks are MAKING money from interest charges as well. No matter how you look at it, we the people will pay in the end anyway as business will inevitably raise their operating costs and pass to consumers. The law that should have been passed is that credit card companies should NOT charge a fee for business to utilize their services. BANKS!

@beattyyz Good points! Also, people usually pay more with credit cards than with cash...which also benefits the merchant. The question I have is, if consumers start footing the interchange fee directly, will the merchants reduce the price of merchandise by the same amount, say 2%, since the interchange fees are already reflected in the price of goods? I doubt it. In other words, we will soon be "double-tapped".

If such surcharges are implemented, I doubt that the higher prices currently in place to recoup these costs will be subsequently lowered by retailers. Most likely this will result in a transfer from Banks to Retailers and not necessarily benefit consumers.

Can't the fee be disguised in a 4% increase in the price of the merchandise or service. Even though Florida (where I live) is not permitted to charge this fee, if you go to a gas station, I am charged a price per gallon depending on how you pay. Use cash or the gas company's credit card and I pay a lower price per gallon. So, to me this ruling is meaningless.

Guess what turnrighthere, I do own a retail business. We will NOT be charging this stupid charge out of respect for the consumer. AGAIN, any retail business that does I for sure will not be spending any money there. In fact, my retail business has started a public notice service advertising those retailers that DO charge this surcharge. Bet we get a nice pick up of their customers.

It's funny that so many of you don't see it as a cash discount instead of a charge card fee. Whether or not you want to acknowledge it, you've been paying more for credit card use all along. Those costs have to be factored in somehow by the retailer. Get a clue.

some of the gas statins by me do it. I don't like to carry much money, so I'll put in $20 in cash if I need to, but I would have filled up otherwise.

again in stores, I'm just going to buy the one thing I went in for if they charge for the credit card, and do my shopping in my regular store that doesn't

Sorry, this is their cost of doing business, If they want me to have the convenience of spending more money at their store, they have to make it do-able. I can spend $50 in cash that they make $20 on, or I can spend $150, that they make $58 on. their choice.

I use credit cards for 95% of my purchases. I pay my balances in full each month and pay no interest. If a place doesn't take credit cards, I keep my $. If they charge fees, they won't see any business from me.

Illegal in CA huh? I know of one fast food chain that charges 75 cents per debit and credit transaction and they have been doing it for years. I just went to a local pizza place and they just put up a sign that there will be $1 fee for credit purchases. It may not technically fall under this law that allows surcharges to be passed along, but its being done. Many businesses are doing it already.

I do find that when I charge, I buy more. If retailers don't like that, I will buy less with cash.

What if I live in a state, NYS, that prohibits these charges, but I use my cc to charge an item online that is in another state? Will the online sites, like Amazon for example, state that I'll be charged a surcharge? What if I order an item from Sears, but the item comes from out of state, is that cause for a surcharge? What if I order an item from China? This could be a book keeping nightmare for certain companies. Not possible to pay online with Cash, obviously. Also some of my creditcards get me discounts on certain sites, so it doesn't seem right I would need to pay a surcharge. Yes I could use a debit card but I would not get as many privileges. Also as indicated if I use a debit card online, and something goes wrong with the order, I have no recourse, so in that regard I think this law does a disservice to card users. What about retailers who hide the fee in the cost of the merchandise? Will they lower the cost of the merchandise in order to charge extra for the fees? Or will we pay even more than we think? How would we even know?

Unintended consequence of commerce interfering with government. The Hard Right claims they merely want to provide a "growth" solution by aligning growth with large corporate interests (or SIFIs- if you like). Trouble with such a view is that a democratic society isn't free.

Even Lock, or Nozick for that matter, would admit as much. Now, we have petty arguments about a few percentage points on the margins of multinational banking interests. Sounds comical in a world of "free floating finance."

Wonder how the "job creators" are going to "spin" this one. "Tempest in a teapot" anyone?

Unintended consequences of our government interfering in commerce. The Democrats gained votes by claiming they were standing up for the people by limiting what the banks could charge the merchants to process the transactions. Will the people take back those votes once they realize that not only will the meddling cost them, but it was done not to protect consumers, but to buy votes so they could stay in office?

Naw -- they voted for a Rock Star instead of a business guy who would solve the economic problems and sure enough, the Rock Star wants to spend so much more money he can't even say how much he wants the debt ceiling raised. Gee, I hope you get your free money.

That sounds fairer than the way it is now, where the retailers tack on an extra 3% markup to pay the CC processors' fees, which means people who pay cash are essentially subsidizing the people that use plastic.

Question? I live in Kansas, so if I buy something online--say the business is based out of Pennsylvania and does not have a location in my state--will I be subject to a fee? Or does the law just forbid merchants from passing on this fee to residents in Kansas? I know it wouldn't apply if I bought something in person in Missouri, but as for online, I know the rules are typically much different.

I’m an owner of a small
online business, I only accept card payments today. Don’t want to pass
the swipe fees along to my customers but the fees really hurt my bottom
line! I looked at Paypal. Same thing… expensive.

Still looking… just came
across Paywithmybank . Much better! Has anyone heard of them? Any other ideas?......